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Classified in: Science and technology, Business
Subjects: ERN, ERP

Direct Digital Holdings Reports First Quarter 2023 Financial Results


First Quarter 2023 Revenue Up 87% Year-Over-Year to $21.2 Million

HOUSTON, May 11, 2023 /PRNewswire/ -- Direct Digital Holdings, Inc. (Nasdaq: DRCT) ("Direct Digital Holdings" or the "Company"), a leading advertising and marketing technology platform operating through its companies Colossus Media, LLC ("Colossus SSP"), Huddled Masses LLC ("Huddled Masses") and Orange142, LLC ("Orange142"), today announced financial results for the first quarter ended March 31, 2023.

Mark Walker, Chairman and Chief Executive Officer, commented, "We are proud to report that our first quarter of fiscal 2023, a typically and seasonally slower quarter in advertising, saw strong topline growth across both our sell- and buy-side businesses. Although we saw some one-time expenses this quarter, driven by unusual events as well as higher expenses year-over-over associated with being a new public company, we believe that we are well positioned going into the remainder of 2023 and look forward to continuing to provide our growing number of clients with the successful digital advertising solutions that have become synonymous with Direct Digital Holdings."

Keith Smith, President, added, "As evidenced by our performance this quarter, we have seen increasing numbers of dollars being spent in the middle market by the multicultural audiences that we work with, as well as an increase in steady demand for our industry-leading solutions in both the niche and broad markets we operate within. Looking ahead, we remain confident in the state of the industry and are eager to continue executing on our operational playbook for 2023 and beyond."

First Quarter 2023 Business Highlights

First Quarter 2023 Financial Highlights:

Financial Outlook

Assuming the U.S. economy does not experience any major economic conditions that deteriorate or otherwise significantly reduce advertiser demand, we are reaffirming our estimate as disclosed in our year-end 2022 update:

"Although we realized some extraordinary expenses this quarter, Direct Digital Holdings continues to outperform the overall ad-tech industry despite challenging macroeconomic factors. As seen in our increased market share and operational efficiencies, we believe that we are well-positioned for the remainder of the year and are committed to maximizing value for our shareholders," commented Susan Echard, Chief Financial Officer.  

Conference Call and Webcast Details 

Direct Digital will host a conference call on Thursday, May 11, 2023 at 5:00 p.m. Eastern Time to discuss the Company's first quarter 2023 financial results. The live webcast and replay can be accessed at https://ir.directdigitalholdings.com/. Please access the website at least fifteen minutes prior to the call to register, download and install any necessary audio software. For those who cannot access the webcast, a replay will be available at https://ir.directdigitalholdings.com/ for a period of twelve months.

Footnotes

(1) "Adjusted EBITDA" is a non-GAAP financial measure. The section titled "Non-GAAP Financial Measures" below describes our usage of non-GAAP financial measures and provides reconciliations between historical GAAP and non-GAAP information contained in this press release.

Forward Looking Statements

This press release may contain forward-looking statements within the meaning of federal securities laws, including the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and which are subject to certain risks, trends and uncertainties.

As used below, "we," "us," and "our" refer to the Company. We use words such as "could," "would," "may," "might," "will," "expect," "likely," "believe," "continue," "anticipate," "estimate," "intend," "plan," "project" and other similar expressions to identify forward-looking statements, but not all forward-looking statements include these words. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements.

All of our forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Our forward-looking statements are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Although we believe that these forward-looking statements are based on reasonable assumptions, many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance expressed in or implied by the forward-looking statements, including, but not limited to: our dependence on the overall demand for advertising, which could be influenced by economic downturns; any slow-down or unanticipated development in the market for programmatic advertising campaigns; the effects of health epidemics; operational and performance issues with our platform, whether real or perceived, including a failure to respond to technological changes or to upgrade our technology systems; any significant inadvertent disclosure or breach of confidential and/or personal information we hold, or of the security of our or our customers', suppliers' or other partners' computer systems; any unavailability or non-performance of the non-proprietary technology, software, products and services that we use; unfavorable publicity and negative public perception about our industry, particularly concerns regarding data privacy and security relating to our industry's technology and practices, and any perceived failure to comply with laws and industry self-regulation; restrictions on the use of third-party "cookies," mobile device IDs or other tracking technologies, which could diminish our platform's effectiveness; any inability to compete in our intensely competitive market; any significant fluctuations caused by our high customer concentration; our limited operating history, which could result in our past results not being indicative of future operating performance; any violation of legal and regulatory requirements or any misconduct by our employees, subcontractors, agents or business partners; any strain on our resources, diversion of our management's attention or impact on our ability to attract and retain qualified board members as a result of being a public company; our dependence, as a holding company, of receiving distributions from Direct Digital Holdings, LLC to pay our taxes, expenses and dividends; and other factors and assumptions discussed in the "Risk Factors," "Management's Discussion and Analysis of Financial Conditions and Results of Operations" and other sections of our filings with the Securities and Exchange Commission that we make from time to time. Should one or more of these risks or uncertainties materialize or should any of these assumptions prove to be incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this Current Report on Form 8-K to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

About Direct Digital Holdings

Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Huddled Masses, and Orange 142, brings state-of-the-art sell- and buy-side advertising platforms together under one umbrella company. Direct Digital Holdings' sell-side platform, Colossus SSP, offers advertisers of all sizes extensive reach within general market and multicultural media properties. The company's subsidiaries Huddled Masses and Orange142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from energy to healthcare to travel to financial services. Direct Digital Holdings' sell- and buy-side solutions manage approximately 153,000 clients monthly, generating over 100 billion impressions per month across display, CTV, in-app and other media channels. Direct Digital Holdings is the ninth black-owned company to go public in the U.S and was named a top minority-owned business by The Houston Business Journal. 

 

CONSOLIDATED BALANCE SHEETS











March 31, 2023


December 31, 2022










ASSETS








CURRENT ASSETS








Cash and cash equivalents


$

6,718,559


$

4,047,453


Accounts receivable, net



19,050,300



26,354,114


Prepaid expenses and other current assets



1,037,877



883,322


Total current assets



26,806,736



31,284,889










Property, equipment, and software, net of accumulated amortization and depreciation of $90,710
and $34,218, respectively



664,937



673,218


Goodwill



6,519,636



6,519,636


Intangible assets, net



13,149,304



13,637,759


Deferred tax asset, net



5,240,074



5,164,776


Operating lease right-of-use assets



756,654



798,774


Other long-term assets



46,987



46,987


Total assets


$

53,184,328


$

58,126,039










LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)








CURRENT LIABILITIES:








Accounts payable


$

13,786,543


$

17,695,404


Accrued liabilities



4,673,785



4,777,764


Current portion of liability related to tax receivable agreement



41,141



182,571


Notes payable, current portion



818,750



655,000


Deferred revenues



949,604



546,710


Operating lease liabilities, current portion



70,014



91,989


Income taxes payable



182,840



174,438


Related party payables



1,448,333



1,448,333


Total current liabilities



21,971,010



25,572,209










Notes payable, net of short-term portion and deferred financing cost of $1,994,724

    and $2,115,161, respectively



22,706,526



22,913,589


Economic Injury Disaster Loan



150,000



150,000


Liability related to tax receivable agreement, net of current portion



4,245,234



4,149,619


Operating lease liabilities, net of current portion



743,572



745,340


Total liabilities



49,816,342



53,530,757










STOCKHOLDERS' EQUITY (DEFICIT)








Class A common stock, $0.001 par value per share, 160,000,000 shares authorized, 3,491,318 and
3,252,764 shares issued and outstanding as of March 31, 2023 and December 31, 2022, 
respectively



3,491



3,253


Class B common stock, $0.001 par value per share, 20,000,000 shares authorized, 11,278,000
shares issued and outstanding as of March 31, 2023 and December 31, 2022



11,278



11,278


Additional paid-in capital



8,330,412



8,224,012


Accumulated deficit



(4,977,195)



(3,643,261)


Total stockholders' equity



3,367,986



4,595,282


Total liabilities and stockholders' equity


$

53,184,328


$

58,126,039


 

CONSOLIDATED STATEMENTS OF OPERATIONS











For the Three Months Ended




March 31, 




2023


2022


Revenues








Buy-side advertising


$

7,439,666


$

5,831,041


Sell-side advertising



13,783,244



5,539,296


Total revenues



21,222,910



11,370,337










Cost of revenues








Buy-side advertising



2,949,153



2,069,346


Sell-side advertising



11,840,706



4,520,192


Total cost of revenues



14,789,859



6,589,538


Gross profit



6,433,051



4,780,799










Operating expenses








Compensation, taxes and benefits



3,634,296



2,555,036


General and administrative



2,940,094



1,640,892


Total operating expenses



6,574,390



4,195,928


Income (loss) from operations



(141,339)



584,871










Other income (expense)








Other income



49,828



47,982


Loss on redemption of non-participating preferred units



?



(590,689)


Contingent loss on early termination of line of credit



(299,770)



?


Interest expense



(1,017,301)



(713,787)


Total other expense



(1,267,243)



(1,256,494)










Loss before taxes



(1,408,582)



(671,623)


Tax expense (benefit)



(74,648)



?


Net loss


$

(1,333,934)


$

(671,623)










Net loss per common share:








Basic and diluted


$

(0.09)


$

(0.09)










Weighted-average number of shares of common stock outstanding:








Basic and diluted



14,575,845



7,106,471


 

CONSOLIDATED STATEMENTS OF CASH FLOWS










For the Three Months Ended March 31, 



2023


2022

Cash Flows Provided By (Used In) Operating Activities:







Net loss


$

(1,333,934)


$

(671,623)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:







Amortization of deferred financing costs



136,004



152,287

Amortization of intangible assets



488,455



488,455

Amortization of right-of-use assets



42,120



17,602

Amortization of capitalized software



47,654



?

Depreciation of property and equipment



8,839



?

Stock-based compensation



94,538



?

Deferred income taxes



(75,298)



?

Payment on tax receivable agreement



(45,815)



?

Loss on redemption of non-participating preferred units



?



590,689

Contingent loss on early termination of line of credit



299,770



?

Bad debt recovery



(120)



(2,425)

Changes in operating assets and liabilities:







Accounts receivable



7,303,934



119,515

Prepaid expenses and other assets



(242,391)



304,425

Accounts payable



(3,908,861)



(926,581)

Accrued liabilities



(39,479)



80,104

Income taxes payable



8,402



?

Deferred revenues



402,894



(916,661)

Operating lease liability



(23,743)



(17,303)

Related party payable



?



(70,801)

Net cash provided by (used in) operating activities



3,162,969



(852,317)








Cash Flows Used In Investing Activities:







Cash paid for capitalized software and property and equipment



(48,212)



?

Net cash used in investing activities



(48,212)



?








Cash Flows (Used In) Provided by Financing Activities:







Payments on term loan



(163,750)



(137,500)

Payments of litigation settlement



(64,500)



?

Payment of deferred financing costs



(227,501)



(185,093)

Proceeds from Issuance of Class A common stock, net of transaction costs



?



11,329,818

Redemption of common units



?



(3,237,838)

Redemption of non-participating preferred units



?



(7,046,251)

Proceeds from warrants exercised



12,100



?

Distributions to members



?



(148,450)

Net cash (used in) provided by financing activities



(443,651)



574,686








Net increase (decrease) in cash and cash equivalents



2,671,106



(277,631)

Cash and cash equivalents, beginning of the period



4,047,453



4,684,431

Cash and cash equivalents, end of the period


$

6,718,559


$

4,406,800








 

NON-GAAP FINANCIAL MEASURES

In addition to our results determined in accordance with U.S. generally accepted accounting principles ("GAAP"), including, in particular operating income, net cash provided by operating activities, and net income, we believe that earnings before interest, taxes, depreciation and amortization ("EBITDA"), as adjusted for stock compensation expense, loss on early termination of line of credit, and loss on early extinguishment of debt, and loss on early redemption of non-participating preferred units ("Adjusted EBITDA"), a non-GAAP financial measure, is useful in evaluating our operating performance. The most directly comparable GAAP measure to Adjusted EBITDA is net income (loss).

In addition to operating income and net income, we use Adjusted EBITDA as a measure of operational efficiency. We believe that this non-GAAP financial measure is useful to investors for period-to-period comparisons of our business and in understanding and evaluating our operating results for the following reasons:

Our use of this non-GAAP financial measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. The following table presents a reconciliation of Adjusted EBITDA to net income (loss) for each of the periods presented:

NON-GAAP FINANCIAL METRICS
(unaudited)











For the Three Months Ended March 31, 




2023


2022


Net loss


$

(1,333,934)


$

(671,623)


Add back (deduct):








Amortization of intangible assets



488,455



488,455


Depreciation and amortization of property and equipment



56,493



?


Interest expense



1,017,301



713,787


Contingent loss on termination of line of credit



299,770





Tax benefit



(74,648)



?


Stock-based compensation



94,538



?


Loss on early redemption of non-participating preferred units



?



590,689


Adjusted EBITDA


$

547,975


$

1,121,308


 

Contacts:

Investors:
Brett Milotte, ICR
[email protected]

Direct Digital Holdings (PRNewsfoto/Direct Digital Holdings)

 

SOURCE Direct Digital Holdings


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